Sturt Manning goes into great detail with regards to the eruption of Thera/Santorini in chapter 34 of Eric Cline's Oxford Handbook to the Bronze Age Aegean (2010), pp. 457-474. As he notes (p. 457):
The prehistoric ‘Pompeii’ of the Aegean world is the horizon of time sealed by the great eruption of the Thera/Santorini volcano in the Aegean in the mid-second millennium BC [...]. This eruption entombed a thriving city with international links (referred to as Akrotiri, from the name of the nearby modern village) and other settlements on Thera, and, through the spread of a tephra blanket (airfall volcanic ash/debris), laid down a clear marker horizon across much of the southern and eastern Aegean, western Anatolia, and some of the East Mediterranean [...].
Though known earlier, the site was excavated in the 1960s and is today a major tourist attraction. The eruption itself, as Manning puts it (p. 458):
was an epoch-scale event -- one of the larger volcanic eruptions of the last several thousand years [...] and it had a substantial, shorter-term impact on the region beyond Santorini, ranging from direct airfall tephra damage in the southeast Aegean, associated seismic and especially tsunami impacts, to (debated) effects on the environment and even the climate over the subsequent months to years [...]
As you can see, there's considerable debate as to what the immediate effects of the Thera eruption would have been. We know too little about the Bronze Age Cretans to assert what they would have made of what just happened. The concept of the "volcano" didn't exist in historic times (cf. the eruption of Pompeii in AD 79) -- there were mountains, and some of them might erupt violently. In Classical times, volcanos like the Etna were said to house Hephaestus/Vulcanus' workshop, but this volcano continues to be active to this day (unlike Vesuvius, which only smokes intermittently and rarely erupts, presumably like Thera/Santorini).
As to how life would have changed, there is considerable debate. The passage above from Manning makes clear that the effects of the eruption on the environment are debated (less sunlight due to blockage from ash/clouds, and therefore failed harvests, etc.?), nor do we fully understand the long-term effects it may have had on the immediate climate in the southern Aegean.
Still, it's usually assumed that the eruption has some impact on Bronze Age Crete. Some have suggested -- Manning gives references -- that the eruption of Thera directly caused the downfall of the Minoan palaces on Crete, but this is no longer supported: the eruption occurred late during the ceramic phase known as Late Minoan IA, and the palaces on Crete weren't destroyed until late in the following ceramic phase, Late Minoan IB.
Now, how long passed between one event and the other is a matter of dating, and there is considerable debate regarding the date of the eruption: the conventional date, based on pottery and synchronisms with Egypt, suggests a date in the late 16th century; radiocarbon dates suggest a date within a certain range in the later 17th century, with 1628 BC the typical date associated with this. The decision whether to accept the conventional date or the radiocarbon date, as Manning suggests in his chapter on chronology in Cline's Handbook, has to do with the age of the archaeologist in question, i.e. younger archaeologists tend to prefer the radiocarbon date!
According to the "high" chronology, there's approximately 150 years between the eruption and the destruction of the palaces (Late Minoan IB is dated ca. 1625/1600-1470/1460 BC). But even in the "low" chronology (i.e. the conventional one), dated ca. 1500-1450 BC, there is some 50 years between the eruption of Thera/Santorini and the destruction of the palaces. So whatever happened, the effects weren't devastating enough to have an immediate impact on Bronze Age Crete in 1625/1525 BC (or even 1600/1500 BC -- absolute dates are a nightmare, which I why archaeologists prefer to stick to relative chronologies!). For more on the dates, see also the table in Cline's handbook on p. 23.
Nevertheless, as Manning also notes, some believe that even if the eruption didn't have an immediate impact on Crete, it may still have been a contributing factor to the eventual destruction of all of the major Minoan palatial centres. We still don't know exactly what happened. John G. Younger, in an article on "Minoan women", published in Stephanie Lynn Budin and Jean Macintosh Turfa (eds), Women in Antiquity. Real Women Across the Ancient World (2016), remarks (p. 588), with my emphasis in bold:
At the end of LM IB, almost every Neopalatial site in Crete was destroyed by fire, with the exception of the central palace at Knossos [...]. These destructions clearly marked a major societal change. The pottery that follows, LM II, is more formal and architectural rebuilding is rare. By the next period, LM IIIA1, Mycenaeans are in charge of Crete; they have established new megarons at a few sites (Ayia Triada, Gournia), and their scribes (native Minoans?) are writing documents in Greek (Linear B).
In this paper, Younger talks about the position of women in Minoan society, and that they clearly enjoyed considerable freedom and had a high status during the Protopalatial and Neopalatial periods of Minoan culture (i.e. the "Old" and "New" Palace periods, with the latter marking the zenith of Minoan culture on Crete).
This situation changed after the destructions in Late Minoan IB. Regarding this "societal change" (ibid.):
It is debated whether the destructions were the result of an internal rejection of the Knossian palatial system or whether Mycenaeans from outside played a role. Regardless, after these destructions, the status and roles of women changed: no more bench rooms, Lustral Basins, large-scale women in landscapes, or imported blue monkeys. Also gone are stone relief vessels, stone bull’s head rhyta, and ivory and faience figurines. In other words, after LM IB, all the products and propaganda that reflect the Neopalatial ideology of Knossos disappear.
The destructions are so widespread across Crete that they certainly suggest some form of societal collapse, rather than the actions of an invader who managed to wreak havoc on a scale otherwise -- and to the best of my knowledge -- not seen in the Bronze Age world. One problem is that we don't really know whether the "Minoans" and the "Mycenaeans" distinguished themselves from each other as different ethnic groups (the terms are archaeological labels, first and foremost). The "Mycenaeans" who formed the elite in Knossos and elsewhere after Late Minoan IB may have already lived there, for all we know.
Anyway, I hope this goes some way toward answering your question, even if we cannot determine what the average Minoan would have made of the eruption.